BETHLEHEM, OCCUPIED WEST BANK
— AS Israel's tax raid on Beit Sahur slides into its second month, this small West Bank town has emerged as a potent symbol of the long struggle between Jews and Arabs for mastery of the West Bank and Gaza Strip. Instigators of the largest tax revolt in the history of the 22-year Israeli occupation, the residents of this mostly Christian community of 12,000 have also borne the brunt of the largest Israeli crackdown. Tax collectors backed by a phalanx of soldiers have carted off more than $1 million worth of confiscated property.

As Palestinians weigh the impact of the siege of Beit Sahur, they are finding cause for both hope and concern.

On one hand, Beit Sahur's stand has galvanized Palestinians elsewhere, giving life to their uprising and refocusing international attention on their quest for greater self-rule.

With its tight political structure based on the dominance of a handful of extended families, Beit Sahur's capacity for solidarity in the face of Israeli pressure has been unique. Moreover, internal Palestinian divisions elsewhere, plus Israel's tight military and civil control, have made such acts of civil disobedience almost impossible to duplicate.

A case in point is the gradual collapse of a months-long effort in Gaza to resist the imposition of identity cards for travel to Israel.

``We're not ready for it yet,'' acknowledges one West Bank source of the ability of Palestinians to mount a widespread campaign of civil disobedience. ``It's a small country, and we can't get away from the [Israeli] authorities.'' The showdown at Beit Sahur began Sept. 21 when Israeli troops set up military checkpoints, cut phone lines, and declared the town a closed military area, barring access to reporters and foreign diplomats.

Israeli sources describe the crackdown as a last resort undertaken only after residents ignored repeated warnings to pay income and value-added taxes owed since before the start of the uprising.

``If people refuse to pay we have to carry out seizures. [Confiscation] is not the goal of the operation, but the law has to be enforced,'' says an Israeli security source.

But behind the operation, say Palestinians, is Israel's determination to quash what it considers a dangerous precedent. The tax revolt could weaken Israeli authority and deprive the Civil Administration - the quasi-military agency that administers the West Bank and Gaza - of money needed to pay the costs of the occupation.

``The tax raids have become more than a simple matter of debt collection,'' says a tax expert at Al Haq, a Palestinian human rights group. ``What's going on is a sustained policy of degradation and humiliation in order to break the town.''

The town has long been a hotbed of political resistance. After officials attempted forceably to collect back taxes in July 1988, 500 residents turned in their mandatory identity cards, sending tremors through the Israeli establishment. The town of educated, politically conscious professionals, insisting on ``no taxation without representation,'' even held out after authorities offered to cut tax debts in half.

``Our taxes pay for collaborators and roads for [Jewish] settlers. Why should we pay such expenses?'' asks a Beit Sahur resident.

But fearing that disobedience could spread, Israeli authorities have drawn the line. Palestinian sources say tax collectors search between five and 25 houses a day.

Residents have been beaten and arrested and food supplies have been cut off, according to a statement recently smuggled out of Beit Sahur by peace activists.

Local leaders issued leaflets urging the town to ``stand firm.'' But the Israel Defense Forces issued an unprecedented leaflet of their own, warning residents that, once news-media interest wanes, ``you alone will go hungry and pay the price of refusal.''

Israeli authorities justify the tax raid saying Israel, like any other country, has the right to confiscate property when taxes are not paid.

Palestinians respond that Israel has forfeited its right to collect taxes in the territories because it has violated international law that governs the behavior of an occupying power.

``The whole point is that the situation is different here than elsewhere because the power to collect taxes is so carefully circumscribed by international law,'' says the Al Haq tax specialist.

Under The Hague Regulations of 1907, all taxes raised in occupied lands are to be returned in the form of payments and services. But since 1967, when the occupation began, Israel has never made a public accounting of tax revenues or expenditures in the territories. Moreover, methods used to collect taxes have been illegal, Palestinians say, including frequent pilfering by tax collectors and failure to keep proper records of property seized.

Palestinians in the rest of the occupied territories have supported Beit Sahur with an unprecedented five-day solidarity strike. Employees of the Palestine Liberation Organization in Tunis are even giving part of their salary to help compensate residents for confiscated property.

But Palestinians have not been able to mount similar tax revolts across the West Bank and Gaza to keep pressure on the occupation authorities.

``We're not looking for a decisive battle that will win the whole war,'' says the West Bank journalist. ``Defiance is a daily thing. In the end we're looking for an atmosphere in which Israel will have to sit down and talk.''

Israeli sources say the siege of Beit Sahur will be lifted when all back taxes have been collected. Palestinians say debts will have to be collected in confiscated property, since no taxes will be paid.